Just last month, predicting the Fed would raise rates four times in 2022 would have been considered wildly ambitious. Today’s Chart of the Day shows it’s being priced in through the spread of eurodollars, three-month contracts used to trade and hedge interest-rate expectations, over the next 12 months. It’s now pricing in 100 basis points in 2022 — meaning a fourth 25-basis-point rate hike this year. Bets have accelerated in the last six months, and steepened even more since the start of January. That said, the market remains divided on just how much the Fed will move this year. The central bank’s dot plot still only shows three rate increases this year, but Wall Street is becoming increasingly hawkish. Goldman Sachs expects four hikes this year, echoing similar calls from Citigroup, Deutsche Bank and JPMorgan last week. Some say even more are warranted. What’s clear is the Fed has many options at its disposal, but it’s the uncertainty of what it’s about to do that’s leading to bond-market bets that were considered extreme just a few weeks ago. Read more about it here on the Terminal or here on the web.
If you have a Terminal subscription, you can also type in G #BTV 7817 into the search bar. Feedback always welcome!